Federal Student Loan Forgiveness
Learn more about what circumstances make borrowers eligible for federal student loan forgiveness
When a borrower of federal loans meets specific requirements or experiences certain circumstances, he or she may qualify for one of the government’s student loan forgiveness programs. If you’re curious whether or not you meet the criteria for student loan forgiveness, review this guide from Citizens Bank on which circumstances do (and don’t) make borrowers eligible for loan forgiveness.
How does student loan forgiveness differ from deferment and forbearance?
Federal student loan forgiveness programs should not be confused with temporary suspensions of federal student loan payments, such as those available through deferments and forbearance which we have outlined below.
Forbearance – This option allows borrowers to temporarily delay repayment of the principal on their federal student loans. All loans will continue to accrue interest during this time.
Deferment – This option allows borrowers to temporarily delay repayment of the principal and, on subsidized federal student loans, the accrual of interest. Unsubsidized federal loans will continue to accrue interest during a deferment period.
If you’re interested in learning if you qualify for deferment or forbearance, contact the servicer of your federal loans for more information on eligibility requirements.
What circumstances make a borrower eligible for student loan forgiveness?
The following circumstances could qualify you for a federal student loan forgiveness program. If you do, you should speak with a qualified tax professional since some programs mandate that the forgiven balance be declared as taxable income. For detailed information on these programs, visit the federal student aid
Specific career paths or public service
The federal government and private sector have established federal student loan forgiveness programs associated with several different career paths and volunteer opportunities. Examples of those who might qualify include the following:
Active members of the military, including those who serve in the Army National Guard.
Full-time teachers employed by Teach for America, city fellowship programs or designated elementary and secondary schools.
Physicians who serve in underserved areas or who practice in non-profit hospitals.
Full-time government employees.
Employees of the federal Head Start, AmeriCorps, Volunteers in Service to America (VISTA) and Peace Corps programs.
Veterinarians, occupational or physical therapists and law enforcement officers in areas with a shortage of these specialists.
Lawyers who work in certain non-profit or public interest jobs.
Each program has specific rules and guidelines for federal student loan forgiveness, and generally these rules revolve around the length of employment, the level of involvement and the type of federal student loans you have. If you choose a career path that could be eligible for federal student loan forgiveness, be sure to research the specific criteria of the programs or jobs you are considering as early as possible to see if you qualify and how to apply.
Qualifying repayment plans
Borrowers who complete one of the following income-driven repayment plans
are eligible to have the remaining balance of their loans forgiven:
Income-Based Repayment Plan – Borrowers are required to pay either 10% or 15% of their discretionary income for either 20 or 25 years. Required payment amounts and repayment lengths are based on when the student loans were taken out.
Pay As You Earn Repayment Plan – Borrowers are generally required to pay 10% of discretionary income for 20 years.
Income-Contingent Repayment Plan – Borrowers are required to pay either 20% of discretionary income or the amount that would be repaid with a fixed repayment plan over 12 years (adjusted per changes in income) for 25 years.
After completion of the repayment plan term, any remaining loan balance is forgiven if the balance has not been repaid at that time. Keep in mind, not all federal loans qualify for income-driven repayment plans, so check with your lender in regard to your situation.
Loan forgiveness is generally granted in the case of a disability that prevents the borrower from earning the income necessary to pay back the debt, or in the event of the borrower’s death.
What circumstances do not qualify a borrower for federal student loan forgiveness?
The following circumstances, though unfortunate, do not currently qualify a borrower for federal student loan forgiveness programs.
According to the U.S. Bankruptcy Code, the formal declaration of bankruptcy alone is not grounds for federal student loan forgiveness. Though there are instances when federal student loans can be discharged with bankruptcy, it is exceptionally rare and borrowers should not consider bankruptcy a viable option for attaining student loan forgiveness.
Though borrowers who are enduring financial hardship may qualify for deferments or forbearance, financial hardship alone is insufficient to qualify for a federal student loan forgiveness program. If you require temporary relief from student loan payments, contact your lender as soon as possible to understand your options. Many lenders will make every effort to work with borrowers who are temporarily unable to make payments.
There are currently no programs in which unemployment qualifies a borrower for student loan forgiveness. Fortunately, borrowers who are unemployed often qualify for deferment or forbearance options to delay payments while they seek work.
Ask a trusted lender like Citizens Bank for alternative options if you don’t qualify for federal student loan forgiveness
While not all borrowers qualify for student loan forgiveness, you may be able to save money in other ways. For example, with the Education Refinance Loan®
from Citizens Bank, borrowers have the option to consolidate and refinance both federal and private loans in order to potentially receive a lower interest rate and save money over the life of the loan. It’s important to remember that when you refinance, you waive any current and potential future benefits of your Federal loans and replace those with the benefits of the Education Refinance Loan, so be sure carefully weigh all your options before you apply. If you have questions about student loan forgiveness or would like to learn more about using the Education Refinance Loan to save on your loans, contact a Student Lending Specialist.